Iran: Myths and Consequences

The real Iran… it’s not mad mullahs and Revolutionary Guards… it’s the people… just like the USA…

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The West is stepping up its efforts to tighten a grip on Iran in connection with its nuclear programme. The USA slapped sanctions on foreign state-run banks that clinched oil deals with Tehran and imposed restrictions on the operations of private financial institutions cooperating with the Islamic Republic. On 1 July, the EU’s launching an oil embargo against Iran. Such an abundance of “economic reprisals” against a major player on the world oil market could have lasting consequences. No more new oil from Iran will be available in Europe after 1 July. Countries will have to rely on the Iranian oil that they purchased under previous contracts. The EU has even banned crisis-struck Greece from importing Iranian oil on preferential terms. Washington’s restrictions on the banks that were “spotted” in partnership with Tehran pursue the same agenda… to slash Iranian oil sales.

The restrictions in question have already had a negative effect on the social and economic situation in Iran, which has seen a rise in food prices and a devaluation of the national currency. However, the embargo on Iranian oil led to an increase in oil prices throughout the EU this spring, to the disappointment of millions of European consumers. Oil prices might spike again after 1 July. The EU accounts for 20 percent of Iranian oil exports, this amounts to about 30 million tons (195 million bbl). Europe expects Saudi Arabia to fill the gap. Nevertheless, Iran has the resources to block the Strait of Hormuz, through which oil from Saudi Arabia and LNG from Qatar reaches world markets.

Yevgeni Satanovsky, of the Institute of the Middle East, said, “As for Iran, it could offset its losses by supplying oil to other countries. This means that the embargo might not prove as effective as planned. Some countries, including South Africa, have sharply increased Iranian oil imports. Consumption of Iranian oil hasn’t dropped in Turkey. South Korea cut Iranian oil supplies, but only slightly. Indian companies reduced the consumption of Iranian oil in the country’s state sector, but it’s increased in the private sector. China, even though it cut Iranian oil supplies, has exerted pressure on Iran to get it to slash oil prices so that Beijing could boost the consumption of Iranian oil for the same prices”.

Because of the embargo, Iran will lose 20 percent of the 100 billion USD (3.25 trillion Roubles. 79 billion Euros. 64 billion UK Pounds) it earns from oil exports annually. The loss is far from disastrous. In addition, sanctions will help to spur Iran’s efforts in other areas. Vitaly Bushuyev, General Director of the Institute of Energy Strategy, observed, “The role of Iran in the formation of world oil prices has been exaggerated. No radical fluctuations on the oil market have been predicted for the near future. Oil prices will range between 85 and 110 USD (2,760-3,570 Roubles. 67-87 Euros. 54-70 UK Pounds). Iran may affect that, but its influence won’t go further than causing one-time price volatility within a maximum variation of 3-5 dollars (97-162 Roubles. 2.50-4 Euros. 2-3.25 UK Pounds)”.

In other words, the western sanctions against Iran won’t trigger any upheavals on the world market or an economic collapse in Iran. Instead, they could hit the wallets of ordinary people in Europe. US Secretary of State Hillary Clinton said that unless Iran takes specific steps to dispel the international community’s concerns regarding its nuclear programme, pressure on it will increase, and it’ll become more and more isolated. As an alternative to economic pressure, Washington might carry out air strikes against Iran’s military facilities. In this respect, attempts to exert pressure on Tehran through economic sanctions aren’t the worst option.

29 June 2012

Ilya Kharlamov

Voice of Russia World Service

http://english.ruvr.ru/2012_06_29/79695943

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Are We Being “Mushroomed” with Oil Prices?

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Do you know what it is to treat someone like a mushroom? Keep them in the dark and feed them bullshit. This is the best way to grow a mushroom and it’s an Australian colloquialism used when we want to keep the truth from someone, and, in fact, feed them disinformation. We’re told that the demand for oil is high, that the Iranian sanctions and the threat of war with Iran are real, and that these factors are keeping the oil price high. However, what if the truth were different, and the world’s awash with oil, and, in fact, the collusion of oil producers and investment banks is keeping oil prices high? Would this constitute being “mushroomed?”

What we’re seeing now, through transactions taking place opaquely between producers and investment banks with funds to sell, is a two-tier oil market. There are those who know where the icebergs are, i.e. a couple of producers and investment banks… and those who are on the Titanic, the investors. The two major centres for trading in oil market contracts are in London and New York, and they’re the ICE (Inter-Continental Exchange) and the Chicago Mercantile Exchange’s NYMEX (New York Mercantile Exchange) division. However, participants on neither of these financial markets can actually buy and sell physical crude oil and set the price. One may best describe these exchanges as betting shops or casinos; moreover, they’re casinos where the roulette wheel has about 10 zeroes favouring the house. In the context of mushrooming, ICE and NYMEX provide a cloud of disinformation about the true state of the oil market that’s taking place out of sight amongst consenting adults.

At present, the world’s awash with oil. For example, Iran has so much spare crude oil above ground they literally can’t give it away, despite their best efforts. The obvious reason would be because of the sanctions on Iranian oil; however, the sanctions are yet to affect the current contracts in place. This doesn’t explain why Iran’s using nearly one in three of its oil tankers for above ground storage now. This is almost unprecedented. Iran is offering, unofficially, of course, heavily-discounted oil to buyers, in an effort to move some of this excess stock.

Then, there’s the curious case of an oil tanker returning recently to Valdez AK, with more than 300,000 barrels of crude oil still in its holds. Two weeks earlier, the ship had set sail with 1.2 million barrels of oil on board for a refinery on the west coast of America, only to find that the storage tanks at the refinery were so full, they couldn’t take the full shipment, so, they duly shipped 300,000 barrels home again. Valdez still supplies a large portion of the West Coast of America’s oil. For the last two years, stocks for crude oil in the USA have been at all-time highs, whilst more recently West Coast refineries are decreasing their production as demand shrinks. Yet, oil prices remain high?

Probably, the greatest responsibility for the “mushrooming” of oil prices rests with Saudi Arabia, which will shortly, for the second time this year, charter a fleet of over a dozen VLCC tankers to ship more than 20 million extra barrels of oil to the USA. Saudi Arabia’s above-ground storage facilities are already overflowing, as are the USA’s private facilities. The only logical place for an extra 40 million barrels of Saudi oil to go would be into the USA’s huge underground Strategic Reserve facilities, where they would neatly fill the gap left by last year’s release of oil in response to the Libyan crisis. The purpose of these strategic reserves is as a response to an emergency, for example, if there was a supply disruption to the USA, then, the government could use some of the strategic reserve to fill the gap. Alternatively, they use it to reduce the price of energy for Americans in times of high oil prices by releasing more stock onto the market. Maybe, President Barack Obama is thinking of doing this ahead of the presidential elections later this year?

It’s generally believed that oil companies trade oil more than 22 times between extracting it from the ground and selling it to the end user, but in fact, that’s just paper oil changing hands, and has no effect on the price. What’s affecting the price has been the ability of producers to literally sell ownership of oil in the ground or in storage to investors and thereby support the price with money borrowed from what Goldman Sachs calls “Muppet” investors. Therefore, the average man on the street is in a state of constant threat, they think that the supply of oil’s incredibly tight and the threat of war’s so real, that they’re prepared to pay excessive prices for energy. Energy is a finite resource, but what we’re seeing is the intentional mispricing of energy on a cosmic scale by one or two oil producers… facilitated by investment banks… and at the expense of general consumers and investors.

Oil should have a visible price at the point at which economic interest changes rather than at the time of the delivery of the cargo. This would effectively create real-time pricing of oil rather than the current petro-dollar system of price-rigging of oil at the time of the actual delivery of the cargo. If you control the cargoes, which the producers do, then, you control the price of oil, and that means that, on the casino markets of ICE and NYMEX, the house always wins. So, are we being “mushroomed” with the price of oil? Absolutely, and that’s no bull!

8 May 2012

Sam Barden

RIA-Novosti

http://en.rian.ru/columnists/20120508/173318553.html

Editor’s Note:

The Republican Party constantly screams about the “invisible hand of the Market”. They tell us that it’s the only fair mechanism in an imperfect world, and that government regulation’s futile. I seem to observe that both Willard Romney and George W Bush are gazillionaires with a good part of their boodle-bag stashed in foreign parts, and that such regulation would affect them, in a very personal way. In fact, it would remove their hands from about the necks of ordinary people. That’s what the “invisible hand” of the market’s all about… the affluent effluent believe that they have a right to steal a living off the backs of the rest of us. That ain’t right… and we don’t have to accept it.

In an imperfect world, vote for President Obama… otherwise, the “hand” of the Market will squeeze us even harder. Follow France and Greece and vote all the Neoliberal “conservative” bastards out… make sure that the Republican Party becomes a minority bloc of religious nutters and crackbrained libertarians. We don’t need the first “saving our souls” and we don’t need the second securing “economic freedom” so that the rich can rape us ever more thoroughly. After, it IS your choice… you can mark your ballot in November… do so…

BMD

Russia Denounced EU Sanctions Against Iran

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Earlier today, Vladimir Chizhov, the Russian Ambassador to the EU, said in an interview with Interfax that Russia condemned the EU sanctions against Iran. He felt that the sanctions imposed on Tehran have exhausted their potential. According to Chizhov, Russia believes that continuing to use sanctions to exert pressure on Iran’s wrong, since they’re bleeding the Iranian economy dry and are affecting the living standards of its population. Besides, the sanctions were untimely, as they were imposed at a time when efforts to settle the Iranian nuclear issue had already begun… Tehran’s cooperating with the IAEA delegation as well as being in contact with the Big Six group of negotiators. Chizhov said that he’s certain that the oil embargo’s also harming EU interests, as Europe’s biggest consumers of Iranian oil, Greece, Spain, and Italy, were hit hardest by the current Euro Zone crisis.

2 February 2012

Voice of Russia World Service

http://english.ruvr.ru/2012/02/01/65068768.html

The Outcome of This Week’s Posturing: Asia Refuses to Back the USA and Europe Against Iran

THIS is the world of Newt Gingrich, Rick Santorum, and Mitt Romney… and what they want to do with Iran. It’s why many countries won’t join the US/EU embargo of Iran… any questions?

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Asian countries threw down a challenge to the USA and the EU. China, India, and Turkey refused to support a ban on Iranian oil imports, and they’ll not allow the USA to block the export of Iranian oil. Japan and South Korea are planning to follow suit. This week, the EU banned the import of Iranian oil imports, but it remains an isolated unilateral action. On Monday, EU foreign ministers approved a new package of sanctions against Tehran that provides for a gradual ban on the import of Iranian crude oil and petroleum products. The EU plans to stop purchasing oil from Iran by 1 July. Until recently, the main buyers of Iranian oil in Europe were Greece, Italy, and Spain, who bought 600,000 barrels a day. Yevgeni Satanovsky of the Institute of the Middle East said, “Europe decided to buy itself some time so that it could find alternatives to Iranian oil imports. Europe will have no problems replacing Iranian oil with oil from Saudi Arabia, the United Arab Emirates, or Kuwait. The Gulf Cooperation Council has already made it clear that it will recoup the losses”.

Meanwhile, some oil refineries in Europe might face quite a headache, for they’re not only set up to refine Iranian crude oil, they refine a particular sort of it. Experts have speculated on whether an embargo will hit the buyer or the seller harder. The IMF predicts a 20 to 30 percent increase in the cost of oil. Sergei Druzhilovsky of the Moscow Institute for International Relations said, “That means an increase of 20 to 30 dollars per barrel at current prices. Europe accounts for 18 to 20 percent of Iranian crude oil exports. A ban on these exports will not collapse or cause any serious problems for the Iranian economy. It might affect oil prices set for China and India, which could create a bit of a problem. It looks like “dumping” is inevitable, as Iran will definitely have crude oil stockpiles available for sale. Iran’s now switching to payments in currencies other than the dollar, the Japanese Yen, the Indian Rupee, and the Chinese Yuan”.

This week, China and India reiterated their determination not to support the embargo. Japan‘s gradually changing its position, having initially yielded to pressure from the USA. It has now asked, as an exception, not to cut its imports from Iran. South Korea dragged its feet over the decision, forced to choose between political solidarity with its pushy overseas ally, and the country’s energy security. Analyst Stanislav Tarasov commented, “Unlike Tokyo and Seoul, Ankara unhesitatingly rejected pressure from the USA without hesitation. Turkey’s position is purely pragmatic. It’s well aware that Europe’s going through a depression and that cutting Iranian oil imports would only make things worse. Iran is Turkey’s main trading partner, accounting for half of its oil imports. Ankara won’t find any alternatives to Iranian supplies amongst the Arab countries, from which it’s trying to distance itself in any case. Besides, Iranian oil offers it freedom to act as it pleases. Turkey is simply being sensible about the issue. A crude political game is underway, aimed at pressuring Iran, which simply testifies to the deteriorating quality of Western diplomacy. The West is trying to make Iran begin talks with the ‘six’ (the five permanent members of the UN Security Council and Germany) on its nuclear programme. The problem is, after Turkey played a crucial role in mediating Iran’s consent to a meeting with the six-party representatives in Istanbul, the West started ‘torpedoing’ the talks”.

Yevgeni Satanovsky commented on Ankara’s position, saying, “Turkey wishes to demonstrate that it’s an independent player, a regional superpower, and sets its foreign policy towards its neighbours as it will. On the one hand, it agreed to station an American radar base on its territory, certainly an anti-Iran move. Yet, on the other, it’ll continue to buy oil from Iran, as Ankara’s interested in energy cooperation with Tehran”.

On Friday, the Pakistani Foreign Ministry reiterated that Pakistan would take part in a project to build a gas pipeline from Iran to Pakistan despite the threat of an imposition of international sanctions, even though the USA is strongly against the project. In commenting on their stance, the Pakistani Foreign Ministry emphasised that international sanctions should be limited to Iran’s nuclear programme and should not affect Pakistan’s participation in a gas project with Iran.

28 January 2012

Konstantin Garibov

Voice of Russia World Service

http://rus.ruvr.ru/2012/01/28/64826214.html